The ROI of Outsourcing. Technology Support to a Managed Services Provider

Transcription

1 The ROI of Outsourcing Technology Support to a Managed Services Provider

2 The ROI of Outsourcing Technology Support to a Managed Services Provider Table of CONTENTS Executive Summary...1 The MSP Landscape...2 MSP Service Models...2 MSP Pricing Models...3 The ROI of Outsourcing to an MSP...4 In-House versus MSP Staff Costs...5 Additional Benefits Drive Decision to Outsource...6 The Hybrid Approach: a Partnership Summary...7 The ROI of outsourcing technology support to an MSP is demonstrable, in dollars and business sense. 1

3 The ROI of Outsourcing Technology Support to a Managed Services Provider Executive Summary One of the easiest ways for companies to save money and gain other business efficiencies is to outsource IT functions to a managed services provider (MSP). The MSP market is growing at a healthy clip. The costs savings of outsourcing can be substantial. The cost benefits of using an MSP are considered table stakes today. Businesses are seeking other benefits, such as improved operational efficiency and enhanced security, from MSPs in addition to cost savings. Without the burden of staffing and maintaining technology support, internal IT staff can focus on improving business processes and innovation that will move the company forward. The ROI of outsourcing technology support to an MSP is demonstrable. 1

4 The MSP Landscape Managing costs, maximizing employee productivity, and focusing on core competencies are three of the biggest challenges facing organizations of all sizes. Increasingly, companies are looking to IT as a source of technology innovation and business growth. Meanwhile, IT budgets remain flat or are decreasing. One of the easiest ways for companies to save money and gain other business efficiencies is to outsource IT functions to a managed services provider, or MSP. The MSP market is growing at a healthy clip. According to IT industry trade association Comp- TIA, the global managed services market is predicted to grow to $193 billion by 2019, which is a compound annual growth rate of 12.5 percent. MSP SERVICE MODELS While the names may vary from provider to provider, the following models represent typical IT services offered by MSPs: Remote Managed Services In this model, all or part of your hardware and software infrastructure is managed remotely. The MSP monitors and controls your devices from its location. Commonly deployed remote services include 24/7 support, infrastructure management, security management, and operating system administration. Infrastructure Hosting Infrastructure hosting can include a turnkey IT solution on vendor infrastructure or use your existing infrastructure in the vendor s data center. Typical services in this model are 24/7 support, infrastructure management, security management, operating system administration, and disaster recovery. Application Managed Services Application management is often added to remote managed services or infrastructure hosting. The MSP manages projects through your application layer, from simple projects such as Active Directory to complex applications such as enterprise resource planning (ERP) and business intelligence. Fully Managed Services. This model entails outsourcing all your organization s IT functions. The MSP executes your IT strategy based on stated business objectives and handles day-to-day IT user support. Cloud services is a growing MSP model that includes offerings such as file backup, hosted exchange, and fully hosted desktop solutions. The MSP is responsible for the computing, security, and maintenance elements of your network. Outsourcing cloud services eliminates the capital expense and support burden of servers. 2

5 MSP Pricing Models While there are many pricing permutations among MSPs, the following pricing models are most common: Tiered Popular among MSPs, the tiered model consists of bundled packages of solutions, services, and support that increase in price as more services are added for the customers. Bronze, silver, and platinum packages are a common example of tiered pricing, where platinum is the most expensive package with higher value add-on services such as emergency after-hours support not included with the silver or bronze packages. A la Carte A la carte pricing allows customers to piece together a service agreement based on only the products and offerings they want. The a la carte model has a great level of flexibility and client customization. All-Inclusive or All You Can Eat This pricing model consists of a monthly flat fee and usually includes all remote support, on-site support, and lab or bench time for an entire organization. With the all-inclusive model, you can budget your IT support costs realistically over a year, with no unexpected billing fluctuations. Per Device Per device is a simple pricing model that requires you to pay a flat rate for each device the MSP supports. Plans are based on the type and number of devices supported. For instance, the MSP might charge a monthly fee of $75 per desktop, $30 per network printer, $300 per server, and $125 per managed network. Per User With per-user pricing, you pay a monthly flat rate for each end user or employee at your organization the MSP supports, regardless of the number of devices each person uses or based on a cap set by the MSP regarding how many devices per user will be included. 3

6 The ROI of Outsourcing to an MSP Cost reduction is the first benefit of outsourcing that traditionally springs to mind. Indeed, outsourcing transfers the cost burden associated with hiring, training, and equipping internal IT staff to the MSP. But cost savings is not the only measure of your ROI of outsourcing. To accurately gauge the return on your investment in outsourcing to an MSP, you need to determine the annual cost of your own internal IT, including productivity losses and network downtime impact, and then compare that cost to the fee proposed by an MSP. To calculate your outsourcing ROI, first quantify these internal IT costs: Annual productivity loss from managing vendors Start with the number of vendors your company uses for IT needs and how long the employee who works with these vendors spends on each one in a month. Annual productivity loss from staff handling IT problems Start by determining the number of hours staff spends on IT issues. Annual revenue/productivity loss from network downtime. Find out how many hours each month services such as and Internet connection go down. Use your company s gross revenue to determine how much your company makes per hour on average, and multiply by the number of hours of downtime. For productivity, multiply the average employee salary by the number of employees on location with the network, then determine the average cost of all staff per hour using the average number of hours each employee works a year. Multiply the hourly rate for all employees by the downtime hours. Now, you re ready for the ROI calculation: Add together existing IT costs, both in-house and outsourced, including support for computers, printers, servers, etc. To this number, add the totals from the sections above to get your company s annual IT costs. Compare the result to the annual fee proposed by an MSP. 4

7 In-House Staff versus MSP Costs When the numbers are crunched, outsourcing tends to be less expensive overall than hiring an IT professional in-house. In addition to a full-time employee s salary and benefits, there are ongoing equipment, workspace, and training costs, along with the initial recruitment outlay. According to YouInc., it can cost approximately 1.5 times the new employee s salary to hire that new employee. In contrast, outsourcing technology support can save you tens of thousands of dollars a year. Let s examine the costs of having an IT support staff versus hiring an MSP. According to Glassdoor, in the United States, the national average salary for a systems engineer with two to three years of experience is $85,000. You can add around 20 to 25 percent to the base salary for overhead costs such as taxes, insurance, benefits, and the aforementioned equipment and training costs. Altogether, this in-house support professional will cost you about $102,000 to $106,250 a year. MSP costs will depend on the size of your organization and devices and users supported, but they tend to be around half the costs of in-house support staff annually. The cost, productivity, and IT efficiency gains of outsourcing all or portions of your IT functions to an MSP are compelling. 5

8 Additional Benefits DrivING A Decision to Outsource Today, cost benefits are considered table stakes of outsourcing, and companies seek to gain other benefits in addition to the financial savings. Chief among them include: Strengthen company focus MSPs let you focus on your core competencies while they focus on theirs. Improve the efficiency and reliability of IT operations Enhance security, uptime, or another business-critical IT function Gain access to exceptional capabilities and newer technologies. Your ROI is greater when you outsource IT to a provider that specializes in the areas you need, rather than solely relying on the knowledge of one or two internal employees. MSPs often use the latest hardware and software in their specialties to get the job done. Free-up internal resources for more strategic work Hiring an MSP allows you to retain employees for their best use, rather than wasting their time on things that someone highly trained in the specific area can probably do faster. Overall IT productivity gains can be significant when routine network management and monitoring tasks are offloaded to an MSP. Fill internal resource gaps When hiring a new employee isn t in the budget, an MSP can be the feasible solution interim or long term. Flexibility is also a compelling driver of outsourcing. If you outsource tech support to an MSP, for example, it s the provider s responsibility to scale up or down with fluctuations in your business. You re paying the MSP to add staff when your business expands or scale down if business contracts. 6

9 The Hybrid Approach: a Partnership Organizations are increasingly turning to MSPs to handle some of their IT needs as part of a collaborative arrangement with their internal IT department, according to research from CompTIA. In these arrangements, MSPs usually complement internal IT. They don t replace it. Outsourcing to an MSP can free up your existing IT staff to spend more time on strategic work and innovation that drives the business forward. This synergy is especially true in larger companies. In fact, many companies 38 percent in a CompTIA survey partner with an MSP primarily to free up existing staff to focus on strategic projects. SUMMARY The cost, productivity, and IT efficiency gains of outsourcing all or portions of your IT functions to an MSP are compelling. Without the burden of staffing and maintaining technology support, internal IT staff can focus on improving business processes and innovation that will move your company forward. REFERENCES: Pros and Cons: Outsourced vs In-House IT Support CIO.com: Why Businesses Are Turning to Managed IT Services TechTarget: What Are the Popular Pricing Models for Managed Services Providers? com/feature/what-are-the-popular-pricing-models-for-managed-services-providers Channel e2e: How do I Price Managed Services? My IT Pros blog: IT By the Numbers In-House versus Managed Services Costs Everest Group: Global Market for Managed Service Providers is Flourishing html/ Calculating Managed Services ROI Does Using Managed IT Services Really Save Money? 1 7